Tag Archives: fiduciary

DOL Reaches Settlement on 401k plans

From Plan Sponsor:

 

The U.S. Department of Labor (DOL) has entered into a settlement agreement with U.S. Fiduciary Services and three of its subsidiaries that provides for payment of more than $7 million to 42 retirement plans that suffered losses as a result of investments in fictitious loans made by Florida-based First Farmers Financial LLC (FFF).

The agreement and anticipated future payments from a pending receivership estate case involving FFF are expected to compensate the retirement plans fully for approximately $16 million in losses.

FFF created the fictitious loans and forged documents stating that the loans were guaranteed by the U.S. Department of Agriculture. Forty-two retirement plans invested in a fund exposed to the fraudulent FFF loans through subsidiaries of U.S. Fiduciary Services.

The DOL’s Employee Benefits Security Administration (EBSA) conducted investigations of the subsidiaries—Salem Trust Company, Pennant Management Inc., and GreatBanc Trust Company—for potential violations of the Employee Retirement Income Security Act (ERISA) in connection with the plans’ investments in a fund exposed to the fictitious FFF loans.

After its investigations, the DOL entered into the settlement agreement with U.S. Fiduciary Services and the three subsidiaries, resolving its claims of ERISA violations. Representatives of the ERISA-covered retirement plans that are due to receive settlement proceeds were also parties to the settlement agreement.

“Fiduciaries must work solely in the interest of participants and beneficiaries,” says Jeffrey A. Monhart, EBSA Regional Director in Chicago. “The Department of Labor conducts investigations and undertakes enforcement actions to protect Americans’ hard-earned benefits. This settlement restores vital benefits that rightfully belong to employees.”

NYU Participants File Second Excessive Fee Complaint

From Plan Sponsor Compliance Section 11/20/17.  For the full article, click here.

 

Participants in the New York University and related plans are making a second attempt to sue fiduciaries for excessive fees.

After a federal district court judge found most claims in an earlier complaint were not plausibly alleged by the plaintiffs, they filed a second complaint in the U.S. District Court for the Southern District of New York. This case was filed against NYU Langone Hospitals, NYU Langone Health Systems, the retirement plan committee, and several named defendants.

As with the first case, which included the university’s Faculty Plan, the participants allege that instead of using the plans’ bargaining power to reduce expenses and exercising independent judgment to determine what investments to include in the plans, the defendants squandered that leverage by allowing the plans’ conflicted third-party service providers—TIAA-CREF and Vanguard—to dictate the plans’ investment lineup, to link its recordkeeping services to the placement of investment products in the plans, and to collect unlimited asset-based compensation from their own proprietary products.

In the new complaint, the plaintiffs attempted to offer more evidence that their claims were plausible.

For example, previously, U.S. District Judge Katherine B. Forrest dismissed all of the plaintiffs’ loyalty claims, finding that the plaintiffs failed to plead sufficient facts to support the loyalty-based claims. “A plaintiff does not adequately plead a claim simply by making a conclusory assertion that a defendant failed to act ‘or the exclusive purpose of’ providing benefits to participants and defraying reasonable administration expenses; instead, to implicate the concept of ‘loyalty,’ a plaintiff must allege plausible facts supporting an inference that the defendant acted for the purpose of providing benefits to itself or someone else,” she wrote in her opinion.

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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